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Thu 29th Jun 2017 - Update: Greene King results, Booker/Tesco merger, Vianet trading
Greene King reports record results: Greene King has reported managed like-for-like sales were up 1.5% for its full financial year, ahead of the market, driven by a good Christmas, a stronger fourth quarter and a strong performance from Greene King Locals. There was a record performance from its tenanted Pub Partners division, with like-for-like net profit up 5.0%. Brewing and brands revenue was up 1.7% with own-brewed volume down 2.8%, but beating the UK cask ale market. Sales were up 6.9% to £2,216.5m in the 52 weeks to 30 April 2017 and operating profit before exceptional and non-underlying items was up 4.9% to £411.5m. A total of £35m targeted annual synergies from its Spirit Pub Company acquisition have been delivered. Year one brand conversions achieved sales uplifts of more than 30%. Rooney Anand, chief executive, said: “Greene King has delivered another set of record results, generating full year Ebitda of more than £500m for the first time. The team has worked hard to maintain momentum during the period and successfully completed the integration of Spirit a year ahead of schedule. This has led to a stronger, more competitive business with an industry-leading portfolio of brands. Our performance has been achieved against a demanding backdrop of increased costs, weaker consumer confidence and increasing competition. While I expect these challenges to intensify over the next few years, Greene King has a very strong track record of delivery in tough market conditions. Using the scale that the Spirit acquisition has brought, we will continue towards our aim of being the best pub company in Britain. We will achieve this goal by ensuring we have the best brands, the best invested estate and the best people in the industry. We will target further market outperformance, in a growing market, supported by additional cost efficiencies, a robust balance sheet and strong cash generation to deliver long-term growth and attractive returns for our shareholders.” Of the Spirit integration, Anand added: “With the integration complete, we can increase focus on our brand optimisation strategy. This strategy is targeted at creating efficiencies through having a smaller number of larger pub retail brands including the five focus brands of Greene King Locals, Hungry Horse, Flaming Grill, Farmhouse Inns and Chef & Brewer. In the year, we spent £30.2m on brand conversions with 63 pubs successfully converted to more suitable brands within the combined Greene King portfolio. The average sales uplift for these pubs is more than 30%. Looking ahead, we expect to make annual investments of £30m to £40m in brand conversions between F18 and F20.” Chairman Philip Yea said: “In my first statement a year ago, I stated Greene King was a strong business with an excellent track record which, following the Spirit acquisition, was at an exciting time in its development. A year on, this remains the case. The team has worked extremely hard over the past two years on the integration which has completed one year ahead of schedule. This means we can now give all our focus to pursuing opportunities to grow and take share, prioritising long-term value creation, while delivering continued strong cash generation and maintaining a robust balance sheet. Ours is a strategically strong and well-managed business which is positioned to address the tougher trading environment forecast for the next few years. We achieved another year of record results and market outperformance, driven by a good performance from the underlying business and an additional seven week contribution from Spirit. Group revenue grew 6.9% to more than £2.2bn, while operating profit before exceptional and non-underlying items increased by 4.9% to £411.5m. Profit before tax, exceptional and non-underlying items grew 6.6% to £273.5m, leading to a 1.3% increase in adjusted earnings per share to 70.8p. Reflecting this performance and confidence in our long-term prospects, the board has recommended a final dividend of 24.4p, giving a total dividend for the year of 33.2p. This represents growth of 3.6% compared with last year and continues the long-term track record of progressive dividends. The board continues to target minimum dividend cover of about two times earnings. We have 44,000 talented and hard-working team members. The continued success of the business during the Spirit integration demonstrates the effort they have put in over the last 12 months. I would like to take this opportunity to thank everyone who has worked so hard during the last year helping us to deliver these results at the same time as completing the integration of Spirit ahead of schedule. At the annual general meeting in September 2016, Ian Durant retired from the board after nine years, latterly as chairman of the audit committee. Rob Rowley took over as audit chair at the same time. In December 2016, Gordon Fryett joined the board bringing a wealth of experience of both retail and property through his career at Tesco. I should like to record the board’s thanks to Ian for his contribution to Greene King over such a critical period. We are excited about the opportunities we see in our core pub retailing brands, where the results from our brand conversions are showing very positive sales uplifts. We will continue with the programme over the coming years, ensuring our pubs remain attractive and relevant to our customers as they face into the challenges that the economic uncertainties will undoubtedly bring. Within the pub sector, Greene King’s combination of brands, teams and assets leaves us well placed to deliver long-term growth and returns to shareholders. Uncertainty affecting both business and consumer confidence is likely to continue following the recent election and the unknown length and outcome of the Brexit negotiations. Alongside the rest of the industry, we are experiencing significant cost pressures but Greene King’s scale and the consequent cost efficiencies, not least from the Spirit integration, should enable us to mitigate much of the cost increases. Our aim is to ensure that Greene King emerges from the near-term period of uncertainty stronger than ever and I look forward to reporting on our progress towards this goal in a year’s time.”

Booker and Tesco request CMA ‘fast-track’: Booker and Tesco have requested the Competition and Markets Authority (CMA) uses its fast-track process in relation to the proposed acquisition of Booker by Tesco. The companies stated: “Following continued constructive dialogue and further to the commencement of the CMA’s phase one review on 30 May 2017, we have now requested the CMA uses the ‘fast-track’ process to allow it to move more quickly to examining the merger through a detailed phase two process. We expect it to issue an early decision to refer to phase two within the next two weeks. We are grateful to the CMA team for the work they have done to date and appreciate the support of customers, suppliers and colleagues during this process.”

Vianet Group reports current trading in line with expectations: Vianet Group, the international provider of actionable data and business insight through devices connected to its Internet of Things platform, has reported current trading is in line with expectations. Chairman James Dickson said: “The group’s trading in the first two months of the current financial year is in line with expectations and our business areas are progressing well. The Smart Machines division, in particular with its coffee vending connectivity and contactless payment solution, continues to deliver growth. While the economic uncertainty around Brexit is generally unhelpful, the impact on the group’s underlying performance should be limited as our products and services are focussed on improving customer profitability regardless of the economic backdrop. As businesses increasingly seek and rely on actionable data, business intelligence and insights, Vianet’s proven Internet of Things capability means it is well placed to grow its position in this rapidly evolving market. Additionally, the group’s high quality recurring income combined with a strong balance sheet and cash flow gives scope for investment in broadening our reach into new areas and markets and for selective acquisitions. While our Smart Zones division customers in the pub sector continue to face well publicised headwinds, the board remains confident of the group’s prospects and that the long term strategy is the right one. This is reflected in the board’s decision to recommend maintaining the final dividend at 4p per share.”

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